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Bagging Lunch: The Inflation Effect

July 15, 2008

A few months ago Jessie Snider, 23, began to feel the pinch of the rising cost of gasoline, food and, well, everything. Then she realized the $75 to $80 she was spending each week on lunch was really cutting into her paycheck. So in March she traded sit-down lunches of elaborate caprese salads and angel-hair pasta for brown-bag lunches of leftover stir-fry and turkey sandwiches.

“Lunch was the first thing I cut back on,” says Ms. Snider, who works as an assistant account executive for a public-relations firm in Atlanta.

Make room for another victim of the weak economy: lunch.

Ms. Snider is part of a growing tide of midday restaurant regulars who are changing their habits to save cash. Instead of indulging in a roasted portobello sandwich and gourmet chips at a nearby bistro, many workers are now brown-bagging it. In fact, online bag retailer eBags.com saw sales of lunch bags and coolers increase 39% in June over the year before. Other workers are turning to cheaper alternatives—like subsidized or free corporate cafeterias and cheaper fast-food spots.

It’s not just the young, entry-level workers who are cutting back. In March, after price increases of 10% to 20% at his favorite midtown Manhattan eateries, Marc Haskell gave up his gourmet spinach salads and turkey wraps and began packing turkey sandwiches from home. The 47-year-old executive vice president of the Glazier Group, a restaurant and hospitality company, says he now saves around $50 a week on lunch.

Though he occasionally misses getting out of the office and socializing with co-workers during lunch, he says eating at his desk has made him more productive. “Instead of going out for an hour, walking to the place and waiting on line, I can basically eat in 10 to 15 minutes and catch up on some news.”

Restaurants Feel Squeeze Popular lunch-hour restaurants say increases in both wholesale food prices and vendors’ fuel surcharges are putting a squeeze on their profits. Indeed, the consumer-price index for all food has risen 5.1% since May 2007 and is expected to rise even further. Then, after price jumps, come the cutbacks from consumers, which further hurt restaurants. According to a Zogby International survey of 755 people conducted in May for Marlin Co., a workplace communication firm, nearly half of employees surveyed had reduced their food purchases.

As a result, restaurateurs cite a decrease in lunchtime traffic—and say existing customers now gravitate toward lower-price items on the menu.

Some are trying to adapt: In February, Costello Sandwich & Sides on the North Side of Chicago, for example, added a less-costly half-sandwich option to its menu in response to customer demand, says Chris Costello, the owner, who adds that this will be the first “no-growth year” in the two-location restaurant’s 10-year history.

Lisa Hall, owner of Kitchenette, two home-style eateries in New York City, recently added an incentive for frequent patrons: For every 10 sandwiches a customer buys, they get the next one free. The goal is to boost revenue with additional sales. “We can charge an extra 25 to 50 cents, but that doesn’t even halfway cover the extra costs we are being charged,” she says.

Nick Liuzzi, owner of Samantha’s Trattoria in New York City’s Battery Park, typically caters to brokers and banker-types. But, as those industries suffer, Mr. Liuzzi estimates that the Italian delicatessen has seen a 15% to 20% drop in lunchtime traffic since last year. “People are more conscientious of their spending; even corporate spending is down,” he says.

Some former $50-a-week lunch patrons haven’t fully abandoned lunches out, but have instead traded in table service for standing in line for a cheaper kind of sandwich. Subway Restaurants says its $5 footlong sandwiches are luring the lunch set away from pricier restaurants. A spokesman for the chain says there has been an increase in customer count since implementing the $5 footlong nationally in late March.

Jennifer Nichols, an account executive for a San Francisco public-relations firm, is one of those new customers. She used to spend $10 a day on gourmet salads and ham-and-cheese sandwiches. About four months ago, the restaurants started to eliminate the cheaper combos meals, and the cost of her lunch became noticeably high. So Ms. Nichols headed to Subway. Now, she buys a footlong sandwich for $5 and saves the second half of it for the next day’s lunch. To further cut costs, Ms. Nichols now buys her drinks and chips at supermarkets or convenience stores. Her new total tab for lunch: $15 to $20 a week.

The Company Kicks In Some employees are discovering that there is such a thing as a free—or subsidized—lunch.

Lawrence Minicone, a financial consultant with FactSet Research Systems Inc., says that lately he’s been heading to the company cafeteria. FactSet, a financial-data provider based in Norwalk, Conn., has provided free lunch four days a week to its 1,800 employees world-wide for years. However, in the past few months there has been a 10% to 15% increase in employees frequenting the cafeteria.

In some cases, employers who didn’t offer much in the way of lunch fare are stepping in to alleviate rising food costs.

At public-relations firm Weber Shandwick’s Dallas office, management has extended free lunches from the first Monday of each month to six or seven times a month since January. Ken Luce, president of Weber Shandwick California and Southwest, says about 80% of the firm’s 102 employees take advantage of the lunches, up about 10% to 15% since last year.

Mr. Luce finds that when the food is brought in, employees eat as a group, which encourages collaboration and boosts morale. He adds that while it may cost more to provide lunch, which ranges from $7 to $12 per person, it makes employees happy. The meals also offset “the cost of turnover,” he says, because it’s cheaper to buy lunch and retain valued employees than it is to hire and train new workers.

GotVMail Communications, a telecommunications company based in Needham, Mass., started subsidizing employee lunches last summer to offset rising food and gas prices in the area. The company’s 48 employees now get a $5 food credit each day that offsets the cost of lunch at area vendors. David Hauser, GotVMail’s co-founder and chief technology officer, says it works out to an added benefit of $1,150 per year per employee, plus gas savings for employees who no longer have to drive to eateries since food is now delivered. About half of GotVMail’s employees take advantage of the program.

Lunchroom Friendships Mr. Hauser says it’s been great to watch friendships form in the lunchroom between people from different departments who hadn’t previously spoken. And, he says, it’s common to find employees chatting about work projects over the company-subsidized lunch.

Employers stand to benefit from providing employees lunch. “It could boost productivity in that there’s less travel time and less transition time,” says Julie Morgenstern, a workplace productivity consultant based in New York and author of “When Organizing Isn’t Enough.” Still, she says employers should encourage workers to get fresh air or leave the building for a few minutes each day so that they don’t make a potential productivity boost a “productivity sink.”